GBP flows: GBP weaker as public borrowing increases
Rise in PSNB dominates modest strength in retail sales
UK retail sales have come in marginally stronger than expected, but GBP has nevertheless weakened in the aftermath, with EUR/GBP pushing above the key 0.87 level, with the much larger than expected public sector borrowing requirement for August at £18.0 bn undermining GBP sentiment. This will put further pressure on Chancellor Reeves to tighten fiscal policy at the November budget (unless we see an improvement in the September and October numbers) so is more significant for GBP than the modest beat in retail sales. EUR/GBP is trading at its highest since August 7th, and should now hold above 0.87 short term, but at this stage we wouldn’t expect progress to test the July 28th high at 0.8763.
